Question
Classical Ltd. Began work in 2020 on a contract for $ 1,250,000. Other data are: 2020 2021 Costs incurred to date...................................................................... $ 540,000 $ 875,000
Classical Ltd. Began work in 2020 on a contract for $ 1,250,000. Other data are:
2020 2021
Costs incurred to date...................................................................... $ 540,000 $ 875,000
Estimated costs to complete as of December 31................. 360,000 100,000
Billings to date..................................................................................... 420,000 950,000
Collections to date............................................................................. 300,000 700,000
Classical uses the percentage-of-completion method. Gross profit recognized in 2020 was $210,000 (Revenue $750,000; expense $540,000). The 2020 opening balance on LT Contract Asset/Liab is $330,000 DR.
Required:
(a) Calculate gross profit to be recognized in 2021.
(b) What amounts will be reported on the Statement of Financial Position in 2021?
(c) If the estimated costs to complete were $300,000 at the end of 2021, how would your response to part (a) change?
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